Testimony of Rep. Sharon Treat
Sponsor

LD 1005, An Act To Continue Access to Dirigo Choice Health Insurance by Reducing Administrative Costs and Replacing the Savings Offset Payment
&
LD 1264, An Act To Stabilize Funding and Enable DirigoChoice To Reach More Uninsured
Insurance & Financial Services Committee

April 14, 2009

Senator Bowman and fellow members of the Insurance & Financial Services Committee. I am Sharon Treat, and I represent House District 79, Hallowell, Farmingdale & West Gardiner. I am pleased today to present to you LD 1005, and LD 1264, two bills intended to improve the funding and operation of the DirigoChoice health insurance program.

Before I get into the details of these bills, I want to tell you why I sponsored them, and how I see this legislation fitting into the options we have before us this session. These bills are not about creating grand new solutions to our health care system. We heard about Single Payer yesterday, and we have bills already presented that radically change our insurance market and our regulatory structure through high risk pools, changes in guaranteed issue and community rating. That’s not what these bills are about.

These bills, plain and simple, make sure that the people and small businesses and nonprofits who currently rely on the DirigoChoice insurance product, or who want to sign up for this insurance option, continue to have that choice.

These bills save money by cutting out administrative waste by getting rid of the current expensive, burdensome funding mechanism which requires million-dollar administrative hearings every single year and which encourages litigation and uncertainty.

These bills provide consistency of funding so that the funds available to run the program don’t fluctuate from year to year and so the insurance company administrator of DirigoChoice can plan ahead and make rational choices.

These bills get rid of the, in my opinion, nonsensical 27-month payment schedule that has created cash flow and other problems. While there may have been valid reasons for adopting this schedule at the time, as we learned in the budget hearings and work sessions earlier this year, this is no way to run a business.

I believe that many of the problems we have witnessed in running the Dirigo program can be laid at the door of a funding mechanism and payment schedule that you would never use in the business world and which have pretty much guaranteed that the program would be contentious, inconsistently funded, and hard to administer as a result.

Yet despite these handicaps facing the programs from the start, the DirigoChoice insurance product is something a lot of people have benefited from and more would like to purchase. We need to remember that this is no giveaway health care program. This is a program of cost sharing, where people pay according to their means. Some enrollees and employers pay the whole freight. Others get subsidized, according to their means. It is a program that provides options to employers who want to do the right thing and offer health insurance to their employees.

And, since its inception, it has been proven to save the health care system millions of dollars in avoided costs, as these same people get preventative care and see primary care doctors instead of going to hospitals for emergency care when their often preventative illnesses become a crisis.

Since the beginning of the program’s operation over 29,000 people have been served. About 5,800 of them are the result of the MaineCare expansion funded through the Dirigo program; the remaining are your neighbors, your constituents and your friends whose incomes are below three times the poverty rate or about $32,000 for an individual and $66,000 for a family of four.

Because of the structural financing problems I just discussed, most enrollment has been on hold for almost two years. Even so, 9,768 people are now enrolled in the DirigoChoice product offered by the non-profit Harvard Pilgrim health plan, and almost 2,300 of those enrollees are in the districts represented on this Committee. I’ve attached to my testimony a list of members in each of our districts. The Dirigo Health Agency website makes available this data by every district in the Maine Legislature and shows the reach of this important program.

The controversy surrounding the financing for this program has, regrettably, taken attention away from the considerable success this program has achieved despite the controversy around its funding. When Dirigo began in 2003, the United Health care state rankings showed Maine ranked 19th in covering the uninsured; in the most recent report we now rank 5th.

What do the bills do?

• Savings Offset Payment. Both bills convert the Savings Offset Payment to a fixed monthly fee that will be paid by the same people who pay the Savings Offset Payment today. Both bills set the assessment at a rate that reflects the same amount that the Savings Offset Payment would have been as of July 1, 2009 (2.14%). Note that this amount is significantly less than the assessment the Dirigo Board is authorized to charge right now under current law (4% of paid claims).

• Transition. LD 1264 and LD 1005 have different mechanisms for shifting from the SOP to the new assessment; LD 1005 accelerates the SOP payments to collect what is already assessed; LD 1264 would collect less money.

• Program redesign. Section 6 of LD 1264 charges the Dirigo Board of Trustees to re-design the program to make it more affordable and able to reach more uninsured.

As a sponsor of the original legislation that created Dirigo Health Reform I know full well the compromises that were made to develop a financing strategy to support it. The Savings Offset Payment has been contentious from the ‘get go’ and subject to court challenges and on-going disagreement.

These bills allow us to stabilize the program, protect those now on it, and move forward, hopefully securing federal funds as well. Theyeliminate $800,000 plus now spent to support the development of the savings analysis and to defend in hearings and court challenges – wasted money in my opinion. And that figure doesn’t even include what all the parties to these hearings spend, millions more that could be put towards providing health care instead.

Most importantly, these bills will allow the program to continue to serve Mainers in need. Unless we pass this legislation, the DirigoChoice product will remain capped in 2009, as it has been since September 2007 due to uncertainty with funding. Although if we do not pass this legislation the program can again open in summer 2010, that’s more than a year from now, and enrollment will top out at 10,000.
Prior to the cap DirigoChoice covered 15,113 members. If the program had continued to grow at historical rates without the cap, today there would be 24,000 DirigoChoice members. According to the budget testimony earlier this year before this Committee and Appropriations, currently the Agency has a waiting list of 2,000 people who have expressed a desire to enroll, and in the past few months, the Agency’s call volume has significantly increased from citizens who have recently lost their employment and who are seeking options to maintain health coverage.

I think these bills are very important and I urge your support. As I said in my opening comments, DirigoChoice isn’t the be-all and end-all in health insurance reform. It may well prove to be a bridge program as we move to a more comprehensive state or federal health care system. Nonetheless, it remains a very important program that provides one more option in the insurance marketplace in this State, and which is relied upon by thousands of Mainers and their employers who want to purchase health insurance.

I have no pride of authorship – I put my bill in at the last minute after the funding source we passed last year was repealed due to the repeal of the soft-drink taxes at referendum. The committee should work these bills together and come out with a bill at the end that has the best approach. But please, I urge that we do something so that this important piece of our health care puzzle can continue in a more rational, cost-effective way and provide health insurance to the thousands who depend on it.